Engulfing Candle Strategy for Reversals

Summary

This script defines bullish and bearish engulfing patterns by comparing the current candle with the previous one. A pattern qualifies when the current high and low span the prior candle’s range and the open and close meet direction-specific conditions. A bullish pattern triggers a long entry; a bearish pattern triggers a short entry.

The document provides the Pine Script logic but no performance results, market tests, or evidence that the signals are profitable. The strategy has no independent stop loss or profit target: positions close when an opposite signal causes a reverse entry. Comments ask about adding stops and other filters, but those features are not implemented. Its behavior and usefulness therefore depend on the instrument, timeframe, and execution assumptions, none of which are evaluated here.

Key ideas

• The pattern requires the current candle’s high and low to cover the previous candle’s range.
• Bullish and bearish conditions use opposite open and close comparisons.
• Each signal submits an entry in the corresponding direction.
• The script does not define a separate stop loss or profit target.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.